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Prepare a report to potential investors advising whether they should invest in Legg Mason Value Trust (LMVTX). The objective is largely to explore the performance of LMVTX in light of the concept of market efficiency and the skills vs. luck of its fund manager, Bill Miller. In preparing your advisory report, you should aim to meet the objective above by addressing the following:
See his comments in his Letters to Shareholders on Value Trust's poor performance http://www.prnewswire.com/news-releases/legg-mason-value-trust-lmvtx-letter-to shareholders-53747992.html
Corporate Social Responsibility (CSR) is associated with the conduct of corporations and in particular, whether corporations owe a duty to stakeholders other than shareholders. Some leaders have started to look at CSR as central to their overall strategies, a creative opportunity to fundamentally strengthen their businesses while contributing to society at the same time.
In a letter to investors (https://ww2.leggmason.com/csr/), Mr Peter Nachtwey (CFO) stated that 'At Legg Mason, Corporate Social Responsibility is more than our environmental, social, and governance (ESG) investment capabilities — it's about how we conduct our business.'
Explain what did Mr Nachtwey mean by the above statement?
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Jenson’s Alpha Ratio measures the excess return of the Security compared to the expected return calculated as per the Capital Asset Pricing Model. Alpha explains the varying contribution of luck and skill of the fund manager. In the give report, abnormal returns of Legg Mason Value Trust is calculated and analysed based on which the mix of skill and luck of Bill Miller, fund manager of LMVTX is discussed.
Jenson’s Ratio measures the excess return of the Security compared to the expected return calculated as per the Capital Asset Pricing Model. Investors usually look for the assets having positive Alpha as positive Alpha is the signal of abnormal positive return. Asset having positive Alpha gives returns higher than the risk-adjusted returns that are estimated using the CAPM model. An asset may show negative Alpha, implying that the returns are not compensating enough over the average of market returns on the given beta of the asset (Ace Managers, 2016).